PIGB: As Nigeria’s Oil Reform Hits Brick Wall

Hopes that Nigeria would enact the much-needed reforms in her oil and gas industry may have been dashed once again with President Muhammadu Buhari’s refusal last week to assent to the Petroleum Industry Governance Bill (PIGB), an offshoot of the omnibus Petroleum Industry Bill (PIB), reports Chineme Okafor.

Prior to last week’s refusal by President Muhammadu Buhari to assent to the harmonised Petroleum Industry Governance Bill (PIGB) the National Assembly sent to him in June, experts and operators in Nigeria’s oil and gas industry were confident the bill if passed into law, would facilitate reforms long expected in the industry.

At various fora and industry meetings where THISDAY spoke to these experts on their thoughts about the bill and process of getting it over the line, they had all expressed optimism that the president Buhari would sign the PIGB into law.

But as the news broke that Buhari refused to assent to the bill for reasons allegedly due to fears that it would cut down his influence over the industry, his aide on National Assembly Matters, Mr. Ita Enang, released a statement to state that his reasons for the refusal was not as reported but basically on constitutional and legal grounds.

Confirming the development, Enang, stated the bill the parliament sent to Buhari on June 8, for final assent into law would not become a law after all because the president had reservations about it.
From Enang’s statement, it looked like Nigeria’s intention to reform her oil industry may have taken a familiar route considering that the country had been on the path to reform the industry for about 20 years now.

Background to the PIGB
Created as one of the four parts of the omnibus Petroleum Industry Bill (PIB), which sought to modernise obsolete provisions in Nigeria’s oil law with an all-inclusive law that aligns with current standards in the global oil industry, the PIGB was primarily set apart to address the governance issues in the industry.

It amongst other objectives, sought to end the reign of individual manipulations of the country’s oil industry via discretionary decisions, and instead empower institutions which would act in the best interests of the country. It equally wanted to do away with bad governance practices which had contributed mostly to the inefficient, ineffective, rent-seeking, bias, and secret manner the country’s oil industry is run, and instead replace them with best practices which could engender the opposite of former irregularities.

At the core of its desires was the proposal to reform the institutional frameworks of Nigeria’s oil industry by setting up a single independent regulatory agency, splitting the Nigerian National Petroleum Corporation (NNPC) into two independent limited liability companies, as well as ensuring the roles of the minister in charge of the industry was clearly spelt out to avoid cases of ambiguous intrusions in the operations of the industry.

Apart from the PIGB which the National Assembly worked on first and passed to Buhari for assent, there were also the Petroleum Industry Administration Bill (PIAB); Petroleum Industry Fiscal Bill (PIFB); and Petroleum Host and Impacted Communities Bill (PHICB), al, of which are still within the parliament for legislative works.

For clarity, the PIAB would according to the parliament, focus on setting up a transparent and efficient management process for exploration and production of oil and gas in Nigeria, while the PIFB will deal strictly with contentious fiscal term such as tax and other contractual regulations in the industry to help the industry and Nigeria optimise the values of the industry as done in other oil producing climes of the world.

For the PHICB, it sought to address issues of rights and opportunities available to local host communities of oil-producing facilities. It amongst other things would serve as the standard for restoration of communities’ environment impacted by oil production, as well as compensation for the social costs of the communities.
As a bill, experts had stated that the PIGB was not perfect, but represented a noble start-off point for Nigeria to quickly begin to reclaim what she had lost to her failure to reform and update her oil industry in the last 20 years.

Significance of the PIGB
Shortly before the president denied assent to the PIGB, a one-time Director of the Department of Petroleum Resources (DPR), Mr. Osten Olorunsola, had in an interview with THISDAY, explained how important it was for Buhari to sign the bill into law.

Olorunsola, who worked with the parliament on the bills as its lead consultant, had explained that since oil remained the bedrock of Nigeria’s economy, the country would be short-changed if Buhari failed to sign the PIGN to law.
“Firstly, the continued uncertainty for investors with respect to the legal framework will linger. Current estimates of direct investment losses is somewhere between $15 and 20 billion per annum. Although enough damage is already done, the earlier that trend is truncated, the better.

“Secondly, the opportunity to plug loses due to inherent inadequacies and obsolescence of existing legal provisions and practices would again have been missed. So, the gross loses are quite huge, from missed investment opportunities to forfeited revenues simply because we have failed to manage our oil and gas resources in a responsible manner,” said Olorunsola.

He further stated: “Besides, what about costs? The cumulative effort and amount spent so far to put the reforms together including consultations is quite huge. To go through the whole process again would amount to unnecessary repetition and waste of resources.

“Ultimately, government can simply say bye-bye to the Economic Recovery and Growth Plan (ERGP) 2017-2020. Mr. President is very much aware of this “road to Kinshasa”! Let us all pray and hope the reforms are concluded as quickly as possible and implemented as designed.”
Perhaps indicative of Olorunsola’s thoughts on how the non-assent to the PIGB could affect Nigeria, economic data released last week by the National Bureau of Statistics (NBS), had shown that the country’s Gross Domestic Product (GDP), declined from about 1.95 per cent in the first quarter, to about 1.5 per cent in the second quarter, and in which the oil sector GDP contracted to -3.95 per cent, from about 14.77 per cent in the first quarter, and a growth of about 3.53 per cent in the corresponding period in 2017.

Equally, the Managing Director of Shell Petroleum Development Company of Nigeria Limited (SPDC) and Country Chair of Shell Companies in Nigeria, Mr. Osagie Okunbor, had in a separate interview, highlighted the multinational corporation was keenly watching to see the final outcome of the PIGB, and from which it would decide on its next investment choices.

Buhari’s reasons for refusing assent
But according to Enang, Buhari opted to refuse assent to the PIGB because the provision of the bill permitting the Petroleum Regulatory Commission to retain 10 per cent of the revenue generated unduly increases the funds accruing to the Commission to the detriment of the revenue available to the federal, states and local governments as well as the Federal Capital Territory to share.
He also reportedly felt that expanding the scope of the Petroleum Equalisation Fund as contained in the bill was in deviation from his administration’s policy.
According to him, there were some legislative drafting concerns which he felt if assented to in the form presented, would create ambiguity and conflict in interpretation of the final law.

Reactions to development
But reacting subsequently to the decision of Buhari, a former vice president, Atiku Abubakar, appealed to him to reconsider his position on the bill.
Atiku, in a statement from his media office, said it was unfortunate Buhari rejected the bill and stated: “I am of the opinion that this is a monumental mistake.”

Atiku, explained: “The reason given by the President for rejecting the bill also betrays the fact that the current administration is out of tandem with global best practices,” while adding, that the PIGB will be “a great catalyst” for Nigeria’s oil and gas sector.
Beside Atiku, civil society groups such as the Civil Society Legislative Advocacy Centre (CISLAC), described as ‘disappointing’ Buhari’s decision on the PIGB.

According to CISLAC, Buhari’s refusal to assent to the bill was a big failure on the part of his government and a lost opportunity to reform and transform the sector to meet up with global standards.
The CSO claimed it was worrisome that in spite of the established losses Nigeria incurs due to the absence of such law, and which the Nigeria Extractive Industries Transparency Initiative (NEITI) puts at $200 billion yearly and another $15 billion yearly in fresh investments, Buhari failed to consider it a matter of national importance to assent to the PIGB.

Its Executive Director, Auwal Ibrahim Rafsanjani, noted that it was unfortunate Buhari failed to assent the bill in spite of his promise to reform the oil and gas sector in the country during his campaigns and repeatedly after his election.
“We find it frustrating and disappointing that this government has spent its tenure without properly addressing this key important sector of our economy where corruption, inefficiency, community conflict and sabotage have been institutionalised.
“CISLAC considers this refusal to assent as a big failure on the part of this government and a lost opportunity to reform the sector and transform to meet up with global standards,” said Rafsanjani in the statement.

He further stated: “The president, who is also the minister for petroleum resources has only superficial reform to show under his leadership, as he was in the position to muster the political will to drive deeper reforms.
“We find it even more worrisome that the passage of the bill had been due since 2016 according to the timeline contained in the 7-Big Wins released by the administration.”

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